Hey repair retailers, we are introducing the VAT Margin Scheme support in the trade-in & inventory modules of RepairDesk.
Pre-owned, second-hand, and used devices can help grow your repair business. And that is why we have equipped our repair shop software with an advanced Trade-in Module. As you may already know that repair stores in the UK and other EU countries need to pay Value Added Tax (VAT) on every sale, except the trade-ins because they come under the margin scheme.
Now, RepairDesk will do the right VAT calculations for your trade-in sales whether you buy them from walk-in customers or pre-owned phone suppliers. But first, let’s have a brief overview of what VAT Margin Scheme is and how it works for your repair shop.
What is VAT Margin Scheme?
VAT Margin Scheme gives retailers the liberty to earn some profit in their buying and selling business. They are taxed for only the difference between the trade-in price and the selling price of the subject item, rather than the whole selling price.
For example, a repair shop retailer does a trade with a walk-in customer. He buys customer’s pre-owned device for £300. Later, the retailer sells that device to another customer for £440. Now, if the retailer is in the UK, the VAT will be 16.67%. So,
Normal VAT: 16.67% of the full selling price £440 = £73
VAT Margin: 16.67% of the profit £140 = £23
You weigh the difference!
VAT Margin Scheme has been designed for a limited range of businesses and that also with a strict set of eligibility conditions. Fortunately, repair shops that do trade-ins of pre-owned and damaged devices and sell them after repairs (if needed) are included.
However, for every item that is claimed for the margin scheme needs to have a complete record on both invoices (buying and selling).
- Invoice Number
- Names, Business names (if any) & Addresses of both parties
- A Stock Book Number of the Item (if purchased from a VAT registered business)
- Item Description
- Price of the trade (in our example £300 while buying and £440 while selling)
- You cannot include any repair expenses, overhead costs, and price of a part used in the repair process or an additional accessory you gave out to your customer while selling the second-hand device, into your VAT Margin Scheme calculations. Although you can claim these through the regular VAT Return.
- If you fail to provide any piece of the required information, you will be disqualified for the scheme and treated according to the normal drill of paying VAT for the full selling price to HMRC.
- We have discussed a brief overview of the VAT margin scheme for items bought and sold between parties within the UK. Even though, this scheme is in action in many other countries as well but under different rules. Be sure to check the rules of your place before applying for its scheme.
Learn answers to the most common questions about VAT Margin for used mobile phones and do profitable tradings.
Find out more
We have recently explored this whole concept of VAT Margin Scheme on our customer’s suggestion. And found out that there’s a lot more to it. So if you need more clarity on this, we would be happy to share more information with you. Fill out this quick form and we’ll get back to you.